Mining giant Rio Tinto (ASX, LON:RIO) has agreed to sell its Kestrel coal mine in Australia to private equity manager EMR Capital and Indonesian coal company Adaro Energy, in a deal worth $2.25 billion.
The transaction makes of Rio Tinto the first major miner to exit the coal industry, and comes only a week after it announced the $1.7 billion-sale of its Hail Creek Mine, also in Australia, to Glencore, as well as an undeveloped project in Queensland to Whitehaven Coal for $200 million.
The sale of its 80% stake in Kestrel brings the total amount Rio Tinto has collected with the latest three coal sales to $4.15 billion, which it said would be used for “general corporate purposes.”
According to analysts at Wood Mackenzie, it could also unlock potential coal output that would have likely been delayed under Rio Tinto’s ownership given competing portfolio interests, the said in a note Wednesday.
“I would like to thank the many people at Rio Tinto and the communities where we operate, whose hard work and commitment has contributed to the success of the coal business over many years,” chief executive Jean-Sébastien Jacques said in the statement.
Since announcing the company’s decision to exit the coal sector last year, the executive has repeatedly said that Rio was not turning its back to coal because of environmental concerns, but because it had better investment opportunities in iron ore, copper, aluminum and bauxite. Indirectly, however, the company still has some ties to coal, as it’s planning to build a power plant for its giant Oyu Tolgoi copper and gold mine in Mongolia.
Under his direction, the company has focused on cutting costs, generating cash and returning as much of it as possible to investors through dividends and share buybacks.
The strategy helped Jacques announce last month a record dividend as 2017 profit hit a three-year high. It was his first annual report as Rio’s CEO, as he only took over from former boss Sam Walsh in July 2016.
Despite the financial success, the miner is facing hard times as is still battling reputational damage brought by a series of incidents, including a probe into a questionable payment made to an external consultant over the Simandou iron ore project in Guinea.
It is also facing fraud charges from the US Securities and Exchange Commission (SEC), the country’s top securities regulator, related to the miner’s and two former executive’s alleged covered-up of multi-billion-dollar losses on a coal investment in Mozambique, allegations which the two men and the company deny.
Rio has also been recently accused of dodging $700 million in taxes at its massive Oyu Tolgoi copper and gold mine in Mongolia.
The company said the Kestrel deal was subject to regulatory approvals and was expected to be completed in the second half of 2018.